Analyst keeps EchoStar on bankruptcy watch

MoffettNathanson senior MD Craig Moffett reiterated a previous prediction that EchoStar is headed for bankruptcy possibly by the end of this year.

“We see EchoStar’s odds of success as a wireless operator to be vanishingly small,” he stated in a research note.

EchoStar president and CEO Hamid Akhavan explained on a Q2 earnings call that his company is currently in “constructive” discussions to address the financing needed to pay off $2 billion in debt maturity by 24 November.

“We’re going to have sufficient cash on hand to pay all of our bills as they become due through the day before we actually have the $2 billion due,” added EchoStar CFO and EVP Paul Orban. “We’d love to raise the money as soon as possible, but we have latitude to wait till basically the day beforehand if we have to.”

Akhavan noted the bulk of EchoStar’s wireless spectrum that it gained after a merger with Dish Network is unencumbered, meaning it could be sold off, auctioned or used as collateral to pay down the debt load.

“We have significant ability to lever our spectrum and create liquidity for many, many years to come,” Akhavan stated.

Moffett noted that while EchoStar’s spectrum holdings have enormous intrinsic value, “intrinsic value has historically been a poor indicator of auction prices.”

“We also think a liquidation would take a very long time, introducing significant time value of money considerations,” he noted.

The bottom line is Moffett foresees bankruptcy for EchoStar over the course of the next four to six months after making a similar prediction the previous quarter.

Q2 numbers
There is a slender ray of hope for the company’s wireless business following the combination of its prepaid and post-paid Boost brands under the single umbrella of Boost Mobile in July.

Wireless subscribers decreased by 16,000, compared to 188,000 a year ago, but the Boost numbers would have increased by 32,000 if not for the government’s Affordable Connectivity Programme coming to an end.

It finished the quarter with 7.2 million Boost subscribers while churn was down to 2.93 per cent compared to 4.54 per cent. Akhavan is bullish retail wireless net additions will be positive for the year.

Retail wireless revenue of $891.3 million dropped from $928.2 million while revenue from its greenfield 5G network increased to $35.5 million compared to $19.3 million.

Orban stated EchoStar invested $237 million in its 5G network deployment, down from $802 million.

Revenue fell 9 per cent to $3.952 billion from $4.356 billion a year ago. EchoStar posted a net loss of $205.6 million versus net income of $212.7 million a year earlier.